Best & Worst ETFs And Mutual Funds: All-Cap Growth

The all-cap growth style ranks fourth out of the twelve fund styles as detailed in my style roadmap. It gets my Neutral rating, which is based on aggregation of ratings of two ETFs and 457 mutual funds in the all-cap growth style as of April 24, 2012.

Figure 1 ranks from best to worst the only two all-cap growth ETFs. Figure 2 shows the five best and worst-rated all-cap growth mutual funds. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst, which allocate too much value to Neutral-or-worse-rated stocks.

Investors need a predictive rating based on (1) stocks ratings of the holdings and (2) the all-in expenses of each ETF and mutual fund. Investors need not rely on backward-looking ratings. My fund rating methodology is detailed here.

Investors seeking exposure to the all-cap growth style should buy one of the Attractive-or-better rated mutual funds from Figure 2.

Figure 3 shows that 481 out of the 2271 stocks (over 45% of the total net assets) held by all-cap growth ETFs and mutual funds get an Attractive-or-better rating. However, none of two all-cap growth ETFs and seven out of 457 all-cap growth mutual funds (less than 2% of total net assets) get an Attractive-or-better rating.

Investors need to tread carefully when considering all-cap growth ETFs and mutual funds, as all the ETFs and 98% of mutual funds are not worth buying. No ETFs and only seven mutual funds in the all-cap growth style allocate enough value to Attractive-or-better-rated stocks to earn an Attractive rating.

Oracle Corporation (NYSE:ORCL) is one of my favorite stocks held by all-cap growth ETFs and mutual funds and earns my Very Attractive rating. I am bullish on the tech sector funds and ORCL is one of the best stocks in that sector. Like my other favorites stocks in the sector, ORCL boasts a top-quintile ROIC (28%), and the company maintains a very strong competitive position. Adept leadership has never been a problem as the company's ROIC has stayed well above its cost of capital since at least 1998. With over $28 billion (about 20% of its market cap) in excess cash, Larry Ellison has the dry powder he needs to remain a leader in the software business.

Triumph Group, Inc. (NYSE:TGI) is one of my least favorite stocks held by all-cap growth ETFs and mutual funds and earns my Very Dangerous rating. TGI has misleading earnings, which means that its reported earnings are positive and rising while its economic earnings are negative and declining. TGI has been a consistent value destroyer with negative economic earnings in nine of the last ten years.

Figures 4 and 5 show the rating landscape of all all-cap growth ETFs and mutual funds.

Figure 4: Separating the Best ETFs From the Worst Funds

Sources: New Constructs, LLC and company filings

Figure 5: Separating the Best Mutual Funds From the Worst Funds

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Sources: New Constructs, LLC and company filings

Review my full list of ratings and rankings along with free reports on all two ETFs and 457 mutual funds in the all-cap growth style on my website.

Disclosure: I own ORCL. I receive no compensation to write about any specific stock, sector, style or theme.

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